Govt may limit licenses for cellular operators

The Jakarta Post, Jakarta

The government may limit the number of licenses issued to cellular operators wanting to enter the country's telecommunications market, citing fierce competition in the industry that has led to "panic and excessive marketing efforts".

Director general of post and telecommunications at the Information and Communications Ministry, Basuki Yusuf Iskandar, told reporters here Friday that he believed the country had "enough" cellular operators and that the government needed to issue some regulations to control the competition among them.

"We've seen exceedingly fierce competition (in the telecommunications industry). This has caused a kind of panic among operators, which has led to excessive marketing efforts, price wars and so on," said Basuki.

"If the cellular operators spend most of their money to beat competitors in such a way, what will be left for the customers then?"

He added that with the excessive marketing efforts, the telecommunications industry had surpassed the cigarette industry as the country's top advertising spender.

Basuki said the government planned to draft and issue some regulations to control competition in the telecommunication industry.

The government's main focuses will be predatory pricing practices, with some operators daring to offer services with "zero fees", he said.

Basuki expressed concerns about the practice, which he said could lead to the collapses of small-scale cellular operators.

"I see a tendency toward excessive price wars. If that continues to occur, only the big operators will survive and that can mean a monopoly in the end. Predatory pricing is a very dangerous practice and we need to make regulations on it immediately."

Another thing requiring regulation, said Basuki, was the trend toward premium SMS, for which higher than normal rates are charged.

He said the premium SMS offers could be misleading, and that the government was currently formulating a draft of a ministerial regulation on the service that was expected to be completed next year.

Regarding the advertising war in the telecommunications industry, Basuki said it was still within acceptable limits, but the government would continue monitoring developments.

He also said the interconnection cost between operators would drop significantly next year, but refused to mention any figure. The drop is expected to drive a decrease in retail prices.

The country's telecommunications industry now consists of 11 cellular operators.

Padjadjaran University found in a study carried out between April and July that all operators had reduced their charges between 2002 and 2007. But these reductions were modest, with XL cutting rates for calls to other networks by 20.59 percent, Indosat by 8.56 percent and Telkomsel by 2.52 percent during that period.

A spokesman for the Indonesian Telecommunications Regulatory Body, Heru Sutadi, said earlier last month that call rates in Indonesia were the second highest in the Asia Pacific region due to the variable interconnection costs for calls between operators.

As for text message charges, he said while the actual interconnection cost was only Rp 75 (0.8 U.S. cents) per message, some operators were charging as much as Rp 350. (wda)